Sarah and Michael - Chapter 7 Bankruptcy 2009
Jul 15, 2009OUTCOME: Discharged 52k in debt and kept 35k.
Problem: Sarah* and Michael* came to see me when they had $52,000 in credit card debt and medical bills. Sarah was also in the process of a wage/hour lawsuit as well as a worker’s compensation lawsuit. ... They wanted to file for bankruptcy right away. Because I was concerned that the lawsuit recovery may exceed the bankruptcy exemptions, I advised that they wait, but they really wanted to get their financial problems behind them. They were sure that the recovery would be under $20,000 from both lawsuits. We filed, but soon after, both of Sarah’s cases closed and the recovery turned out to be closer to $35,000, which exceeded the wild-card exemptions. Chapter 7 Trustee wanted the excess amount of about $14,000, however, she allowed for a continued meeting. My clients were already coming to terms that they were going to lose the $14,000 in the bankruptcy. Solution: After many hours of research I was able to prepare a letter to the Trustee showing both case law and factual evidence that part of the recovery should be protected under a personal injury exemption and the remainder under the wild-card exemption. The Trustee agreed with me and filed a no-asset report, allowing my clients to keep all the lawsuit money. Outcome: As a result, my clients were able to discharge their debt of $52,000 and start fresh with $35,000. They were also able to get out of a bad apartment lease (without penalties) and move into a much better place with their new dog and baby. *Names and exact figures/dates changed to protect clients' identity.
